Looking ahead to the evolution of the Kyoto framework
over time, there are other conditions that will clearly have
to be met if emissions are to be reduced further. Some
countries are already very concerned at what they see as a
division of the global atmospheric commons into property
rights without the establishment of an agreed basis for the
allocation of those rights. Given that there is, as yet, no
agreement on the level at which we should be aiming to
stabilise the atmospheric concentrations of greenhouse
gases, it is scarcely surprising that a long term global
emissions envelope has not been settled. At Kyoto we did
nothing more than agree on a first step without any real
idea of how fast or far to go subsequently.

In my view,
the attempted debate on basic rights is still premature.
The Kyoto agreement did not allocate rights. It simply
established some first round responsibilities by laying
down initial limitations on hitherto infinite rights, for
some countries. The question of basic emission rights will
be much riper for discussion when we get down to charting
the trajectory necessary to ensure that long-term greenhouse
gas concentrations are at safe levels.

I believe we need
to take an evolutionary approach to the development of the
Protocol. The greater the complexity of an international
process, the more likely it is that we will only be able to
proceed by incremental steps. The timing of those steps
will be critical.

We cannot at this stage accurately
estimate the costs of acting to reduce emissions. We would
all like more complete knowledge about mitigation costs and
opportunities, but these will not be known until action is
started (ie we will learn by doing). One risk here is that
the absence of longer term targets (or at least clear and
consistent signals) could affect the nature of near term
action which can be agreed.

It is important to bear in
mind the time-frame over which action on climate change is
required. This is not a short-run problem, but one we will
have to work on over a generation or more. It also affects
a large portion of our capital stock - that portion which
depends on fossil fuel use, as well as other elements linked
to other greenhouse gases. It thus affects many aspects of
our economic and social lives. The eventual extension of a
framework for action beyond the first commitment period
demands progress on creating a fair, efficient and effective
framework now - or at least over the period to COP6 - if we
hope to have an international agreement and process that is
sustainable over the longer term

Deferral or delay would
ultimately increase the costs of meeting targets, since
emissions in the interim may be higher than they would
otherwise have been. We should also remember the sheer
timeframe requirements for the development of technical
frameworks. These are not built in a day, even once
agreement on overall shape is achieved. Delay and deferral
also threaten the integrity of the Protocol itself, and
encourage people to think there may be other simpler
solutions. This could prove to be a profound mistake, since
any process will have to grapple with the same problems and
history suggests that human beings are rather better at
incremental progress than successfully thinking through
grand plans on the basis of inadequate knowledge.

Is there
a way forward?

By COP6, we will need to have resolved the
unhelpful debate over trading restrictions under the
Protocol. We will need to have developed a clear
understanding of how each of the Kyoto mechanisms will
operate in practice, ensuring that they work sensibly with
the grain of the market while at the same time maintaining
the environmental integrity of the Convention. We will also
need to be engaging developing countries on how we can
establish a clear timetable for future emission limitation
commitments.

I also believe concerns about the 'hot air'
available to the economies in transition (EIT) could be
addressed more creatively. It would not be fair to EIT
countries to relitigate their targets or their ability to
trade. But, by being creative, we should be able to develop
a 'win-win' idea - (which I know the Russians, for one, have
in mind) - which ensures that payments for hot air under
emissions trading are applied to environmental clean-up.

In terms of immediately pressing concerns, cleaning up
the vast toxic legacy of the old communist regimes ranks
near the top. The scale of the problem is such that the
economies of Russia, Ukraine and others have no hope in the
foreseeable future of making any headway at all. Purchasing
the rights they currently possess to increase emissions, and
thereby generating a fund for clean-up, would solve a major
conundrum in current negotiations. It would also, by the
way, probably do more than any other single measure to
secure the future environmental security of the European
land mass. European countries, as far as I am aware, have
no plans to bankroll a clean-up on the scale required. It
would be strange if they stood in the way of a solution that
could achieve it and secure the ratification of the Kyoto
Protocol at one stroke.

As far as carbon leakage to
developing countries is concerned, the rich industrial
economies should be focussed less on how they can invent
protective mechanisms for their own industries and more on
how, through CDM and other means, we can speed up the
transition of developing economies to a less carbon
intensive future. Rising per capita incomes will also
enable developing countries to address environmental issues,
both in an economic sense and in a political sense.

If
progress is to be made on these and other issues the way
forward is strewn with economic considerations. The single
most important suggestion I can offer as a way forward is to
take negotiations, at least for the time being, out of the
hands of environment ministers and engage trade, finance and
economic ministers. I have talked to environment and
economic ministries around the world. I have to tell you
that the dislocation between them is near-universal and in
some cases breathtaking. The OECD, whose Round Table on
Sustainable Development I chair, provides ample evidence of
this pathology in its regular round of meetings. Despite
impressive and well-resourced work programmes that span the
agency's divisions, Ministers arrive at separate meetings
and do not even cover the same agendas. I doubt whether
trade or finance ministers at the OECD have even had a
formal discussion on climate change.

The dislocation in
developing countries is not, to my knowledge, a lot
different although climate change negotiations are
frequently in the hands of foreign ministries. There is
little evidence to suggest that diplomats are any better
than environmentalists at engaging their economist
colleagues!

The upshot of all this is a sense of unreality
about the sorts of debates we have at FCCC conferences of
the parties. Environment ministers are left to practise
their rhetoric on the possible disasters of run-away climate
change while their negotiators are left to defend national
economic interests on behalf of finance ministers who have
in many cases only a passing acquaintance with the issues.
Unless this changes we are going to see slow progress and
poor policies.

Conclusion

With the exception of the
very last point, there is nothing in this paper that will be
particularly new for those of you who have followed the
debate as I have over the last decade. That in itself is a
source of worry. I have the feeling that - like many other
old hands in this debate - I have been refining and
re-refining an argument that is not necessarily engaging
others in the same way that their arguments are engaging me.
That suggests there are some large submerged reefs in this
debate that we are all steering clear of. That sort of
elegantly choreographed evasion will not take us
anywhere.

The truth is that, at this point, it is as
likely that the Kyoto Protocol will be still-born as it is
that it will be brought into force. In saying that, I am
acutely aware that there are those who, passively or
actively, hope that it won't come into effect, because they
dismiss the science. Others hope the protocol will founder
because they believe the terms of the Convention are
fundamentally flawed.

To the latter group I can say that
trying to start all over again would be a hugely costly
exercise in terms of political capital, time and lost
opportunities. Ultimately the world will have to face up to
the issue. Protracted delay will simply mean far greater
pressure to reach solutions in short order, having
squandered the opportunity to phase in the adjustment to new
policies gradually.

We are, in terms of risk management
and in terms of international negotiations, in completely
uncharted waters. It will require an extraordinary amount
of hard work and good will if we are to find our compass
bearings.

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